The agreement you have should reflect how well you know the person, how well you trust them, and what the worst case scenario is. I'd suggest you almost certainly want lawyers involved in this part as they can give you a fairly boilerplate agreement that's tailored around the 4 or 5 key questions that you'll need to think really hard about.
Bear in mind that in a partnership, rather than a limited company, you have full personal responsibility for all debts (and not just in the normal course of business: you also need to consider someone suing you, such as disgruntled client). A simple partnership, without an explicit agreement to the contrary, will also include joint and several liability. In other words if one partner were to do something incredibly stupid, all the partners would be liable for up to the full amount owed.
There's no reason why that sort of set-up _can't_ work: there are numerous businesses that run like that quite happily, but you should be sure that you're comfortable with the risks.
Keep in mind that you can set up a Limited Liability Partnership, which would seem to make a lot of sense in this situation. Liability is limited in the same was as in a Ltd. company, but it differs in how profit sharing is handled. Check with an accountant for details.
Thanks. In terms of trust, well, I trust him enough to go ahead (certainly I know he wont deliberately screw me) but perhaps would like to have some form of legal entity or fallback in case things go sour.
I dont forsee it at all but it's not a partnership that I would happily walk into w/o any agreement - if that makes sense (there are some friends I would do so with).
I disagree completely, unfortunately from experience.
The need for lawyers has nothing to do with how much you trust the person-- the key factor is the amount of money, and your willingness to walk away from it.
If the sum of money involved (now, or in the future) is large enough that you don't want to be able to get screwed out of it, lawyer up.
The people you trust today might just turn out to be untrustworthy somewhere down the line-- you never know.
The reason we have lawyers look over documents is that they write these types of documents everyday and they can tell if you've missed anything.
This comes in handy when a dispute arises or some other unforeseen event.
Joel talks about this on the Stackoverflow podcast when they discuss using a lawyer to review the FogCreek office rental agreement.
The gist of it is that when lawyers talk about problems( ie a tenant paying his/her rent late) then its' just lawyers talking, but if a tenant broaches this subject with the landlord then suddenly it's confrontational as the landlord is now wondering if the tenant is asking this because they plan on not paying,etc.
You should have a lawyer look at most contracts you sign.
> Joel talks about this on the Stackoverflow podcast when they discuss using a lawyer to review the FogCreek office rental agreement.
This is not a rental contract, that the ability of 100 (?) employees to their job rests on. If Joel gets to the Fog Creek office one morning and finds the locks changed, he looses thousands of dollars a day - and not just his own money, that's money that he already owes in wages and so on. Absolutely, get a lawyer.
These two guys are doing some contracting on the side. There are no investments and no liabilities. Their worst case scenario is walking away, not talking to each other, maybe disputing a few $1000. Doing ten rounds with a lawyer (there's really no boiler contract that can cover every conflict two friends working together might encounter) easily costs that, AND then you'll still have to go to court to enforce the contract.
Spend an afternoon writing down a page of bullet points of the rules that should govern this cooperation.
> You should have a lawyer look at most contracts you sign.
No, you should familiarize yourself with basic contract law and be able to estimate the worst case scenario, and decide if that's a risk you want to take.
> These two guys are doing some contracting on the side. There are no investments and no liabilities. Their worst case scenario is walking away, not talking to each other, maybe disputing a few $1000. Doing ten rounds with a lawyer (there's really no boiler contract that can cover every conflict two friends working together might encounter) easily costs that, AND then you'll still have to go to court to enforce the contract.
Well then we disagree. This contract would require about 2 hours from a good lawyer. At least when I entered in a similar partnership with a friend that's what we spent.
I'm more thorough/cautious than you. All that means is that you and I are unlikely to do business with each other:)
Bear in mind that in a partnership, rather than a limited company, you have full personal responsibility for all debts (and not just in the normal course of business: you also need to consider someone suing you, such as disgruntled client). A simple partnership, without an explicit agreement to the contrary, will also include joint and several liability. In other words if one partner were to do something incredibly stupid, all the partners would be liable for up to the full amount owed.
There's no reason why that sort of set-up _can't_ work: there are numerous businesses that run like that quite happily, but you should be sure that you're comfortable with the risks.